state insurance department

STATE INSURANCE DEPARTMENT

Enabling Laws

Act 1583 of 2003Act 1628 of 2003 Act 1762 of 2003Act 78 of 2003 - 2nd Extraordinary SessionAR Code §23-60-101---23-101-114AR Code §26-57-601---26-57-616AR Code §24-11-301; 24-11-809AR Code §23-102-105---23-102-119AR Code §11-9-301---11-9-307AR Code §21-14-101(d)(2)AR Code §23-40-101AR Code §21-2-707-21-2-708(b)&(c) et seqAct 809 of 1979Act 1570 of 1999

History and Organization

The purpose of the Arkansas Insurance Department is to serve and protect the public interest by the equitable enforcement of the State's laws and regulations affecting the insurance industry. The primary mission of the Department is consumer protection through insurer solvency, market conduct regulation, and fraud prevention and deterrence.

It is the responsibility of the State Insurance Department to regulate all persons conducting the business of insurance in the State of Arkansas. This includes the review and licensing of insurance companies desiring to be admitted, and the review and approval of companies wishing to do business on a non-admitted or surplus lines basis, the examination of the affairs and financial condition of each domestic insurer every three to five years and foreign insurers when necessary, testing and licensing of all persons applying to become insurance agents, reviewing and analyzing policy forms and rate filings, and the collection of applicable premium taxes and fees. In addition, regulate and license limited surety agents, automobile clubs, health maintenance organizations, pre-paid legal insurers and hospital and medical service corporations. Registration requirements have been established for third party administrators. The Department has responsibility for the collection of funds for the Firemen’s and Police Officers’ Pension Funds. It assists state agencies, institutions and schools in the establishment of appropriate insurance programs and procurement of coverage. The Department receives and investigates complaints from citizens concerning persons engaging in any of the areas regulated, and provides information to the public with regard to these entities. Legislation is prepared and rules and regulations are promulgated to effectively carry out duties. The Department administers domiciliary and ancillary receivership proceedings for companies placed in rehabilitation or liquidation. The State Insurance Department operates with a trust fund. Legislation established the Workers’ Compensation Fraud Investigation Unit, the Insurance Fraud Investigation Division, and PrePaid Funeral Benefits Division; all operating with trust funds.

STATE INSURANCE DEPARTMENT - 0425Mike Pickens, Director

56

The Public Employee Claims Division was created within the State Insurance Department. The Division is designated as the unit of state government primarily responsible for the administration of Public Employee Workers’ Compensation claims in the state of Arkansas.

Agency Commentary

It is the responsibility of the State Insurance Department to regulate all persons conducting the business of insurance in the State of Arkansas. This includes the review and licensing of insurance companies desiring to be admitted, and the review and approval of companies wishing to do business on a non-admitted or surplus lines basis, the examination of the affairs and financial condition of each domestic insurer every three to five years and foreign insurers when necessary, testing and licensing of all persons applying to become insurance agents, reviewing and analyzing policy forms and rate filings, and the collection of applicable premium taxes and fees. In addition, regulate and license limited surety agents, automobile clubs, health maintenance organizations, pre-paid legal insurers and hospital and medical service corporations. Registration requirements have been established for third party administrators. The Department has responsibility for the collection of funds for the Firemen’s and Police Officers’ Pension Funds. We assist state agencies, institutions


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and schools in the establishment of appropriate insurance programs and procurement of coverage. The Department receives and investigates complaints from citizens concerning persons engaging in any of the areas regulated, and for providing information to the public with regard to these entities. Legislation is prepared and rules and regulations are promulgated to effectively carry out duties. The Department administers domiciliary and ancillary receivership proceedings for companies placed in rehabilitation or liquidation. Legislation has added the Workers’ Compensation Fraud Investigation Unit, the Insurance Fraud Investigation Division and PrePaid Funeral Benefits Division to the Department.

The Public Employee Claims Division was created within the State Insurance Department. The Division was designated as the unit of state government primarily responsible for the administration of Public Employee Workers’ Compensation claims in the State of Arkansas.

The Administration and Regulatory Support Services Program provides management, personnel, information technology, and material resources for the support of all programs assigned to the State Insurance Department. The Department is requesting the addition of 4 new positions, changes in 33 other positions, and additional resources in Operating Expenses to relocate an expanded Risk Management operation to new quarters.

The Insurance Regulation and Consumer Protection Program conducts consumer protection activities that include financial examinations, industry licensure, rate reviews, and continuing education. It also conducts a Risk Management Program to minimize government insurance costs and losses and regulates the prepaid funeral contracts industry. The Department is requesting 3 additional positions and changes in 46 current positions, along with increases in Operating Expenses and Capital Outlay for replacement of data processing hardware and software purchases.

The Insurance Fraud Investigation Program enforces insurance criminal fraud provisions by investigating and causing prosecution of violations of the Arkansas Insurance Code and the Worker’s Compensation Law. For this program, the Department is requesting a new position of Attorney Specialist, changes in 7 current positions, and additional resources in Operating Expenses and Capital Outlay for information technology needs. Also requested are increases in Conference Fees and Travel for additional training costs.

The Worker’s Compensation for State Employees Program provides claims management and worker’s compensation benefits for State, public school, city, and county employees with work related injuries or illnesses while striving to minimize injuries and claims costs. The Department is requesting 2 new positions, changes in 2 current positions, and increases in Operating Expenses for the purchase and maintenance of claims management software.

Continuation is requested for the Multi-Agency Insurance Trust Fund Program that was established at the beginning of the 2003-05 Biennium to reduce the cost of insurance for state agencies by pooling their premium dollars in the purchase of broader coverage in fewer policies with larger deductibles.

Continuation is also requested for the Public School Motor Vehicle Insurance Program and the Public Elementary/Secondary School Property Insurance Program that were transferred to the State Insurance Department from the Department of Education.


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Audit Findings

Findings Recommendations

DIVISION OF LEGISLATIVE AUDIT

AUDIT OF :

STATE INSURANCE DEPARTMENT

FOR THE YEAR ENDED JUNE 30, 2003

None None

%TotalFemaleMale

Employment Summary

55 72 White Employees 127 % 77

4 30 Black Employees 34 % 20

1 4 Other Racial Minorities 5 % 3

Total Minorities 39 Total Employees 166

23%% 100

Publications

General AssemblyGovernor

Reason (s) for Continued Publication and Distribution

# Of Copies

Required for

Statutory Authorization

Name

A.C.A 25-1-204

Annual Report A.C.A. 23-61-112 750Y N Required for the Governor and provided to others upon request.

Newsletter None 3,000N N Annually provide insurance fraud information to the public.


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Appropriation / Program

2006-20072005-20062004-20052004-20052003-2004

ExecutivePosAgencyPosExecutiveAgencyBudget PosPosAuthorizedPosActual Pos Pos

Agency Request and Executive RecommendationHistorical Data

Department Appropriation / Program Summary

13,145,598 17,286,399 17,357,755 17,758,334 17,842,981 17,322,331 17,400,195 0425P01 Admin/Reg Support Srvs 50 52 52 56 56 52 52

4,370,250 6,207,039 6,158,483 7,830,081 6,949,458 7,412,840 6,521,456 0425P02 Regulation/Consumer Protection 81 82 82 86 86 82 82

972,252 1,156,268 1,158,268 1,310,029 1,321,753 1,160,710 1,184,752 0425P03 Insurance Fraud Program 16 16 16 17 17 16 16

10,955,022 12,446,470 12,453,470 12,653,611 12,591,766 12,495,174 12,500,126 0425P04 Wkrs Comp/State Employees 23 24 24 26 26 24 24

3,711,097 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 1QA AMAIT 0 0 0 0 0 0 0

498,533 5,129,516 0 5,133,143 5,135,916 5,133,143 5,135,916 2HJ Sch Motor Vehicle Insurance 0 2 2 2 2 2 2

2,066,034 9,184,488 0 9,190,246 9,194,213 9,190,246 9,194,213 2HK PE/Sec School Insurance 2 4 4 4 4 4 4

NOT REQUESTED FOR THE BIENNIUM

7,164,812 8,000,000 8,000,000 0 0 0 0 1NZ Health Ins Pool 0 0 0 0 0 0 0

835,188 0 8,000,000 0 0 0 0 1PG Fire Departments 0 0 0 0 0 0 0

172 Total 43,718,786 69,410,180 63,127,976 63,036,087 63,875,444 62,714,444 61,936,658 180 180 191 191 180 180

Funding Sources % % % % % %

27,397,833 40,054,279 32,083,314 30,907,222 32,083,314 31,897,852 36.2 39.5 33.8 33.9 33.4 34.1 4000005Fund Balance

163,405 293,822 319,311 323,795 307,411 311,895 0.2 0.3 0.3 0.3 0.3 0.3 4000020Federal Revenue

11,826,965 12,513,312 13,738,575 12,682,211 13,580,138 12,590,571 15.6 12.3 14.5 14.4 13.7 13.5 4000030Special Revenue

27,055 88,222 88,222 88,222 88,222 88,222 0.0 0.1 0.1 0.1 0.1 0.1 4000045Cash Fund

18,055,869 26,418,859 26,428,244 26,434,984 26,428,244 26,434,984 23.8 26.0 27.9 27.9 28.6 28.3 4000050Trust Fund

9,245,928 11,975,000 11,975,000 11,975,000 11,975,000 11,975,000 12.2 11.8 12.6 12.7 12.9 12.8 4000350Miscellaneous Revolving

9,056,010 10,150,000 10,150,000 10,150,000 10,150,000 10,150,000 12.0 10.0 10.8 10.7 11.0 10.9 4000735Workers' Comp Revolving

For FY05, the Fund Balance amount includes $8,000,000 that is reserved for transfer to the Comprehensive Health Insurance Pool in accordance with provisions in Act 1583 of 2003.

Total Funds

Grand Total

Excess Appropriation/(Funding) (32,054,279)

75,773,065 94,782,666 92,561,434 101,493,494

43,718,786 63,875,444 69,410,180

(32,083,314)

63,036,087

(30,907,222) (29,525,347)

62,714,444

(31,897,885)

94,612,329

(31,511,866)

93,448,524 100.0 100.0 100.0 100.0 100.0 100.0

61,936,658

STATE INSURANCE DEPARTMENT - 0425

Mike Pickens, Director

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Analysis of Budget Request

Appropriation / Program:

Funding Sources:

0425P01 - Admin/Reg Support Srvs

TSI-Trust, NDD-Cash in Treasury, MTA-Miscellaneous Revolving Fund

The Administration and Regulatory Support Services Program provides the management, personnel, information technology, and material resources to support all department operations and to continue to improve consumer protection by regulation and information dissemination. Funding for this program is by Cash Funds in the State Treasury for examination reimbursements and consumer education, Miscellaneous Revolving Funds for Refunds and Overpayments of premium taxes, and special revenues in the State Insurance Department Trust Fund for administrative and consumer protection expenses.

The Agency’s Fiscal Year 2004 Progress Report identified eight measures, of which the targets for seven were met or exceeded. The measure for the number of proprietary information systems maintained by agency staff or through contractual services resulted in six, compared with a target of 10. At this time, the Strategic Plan for the 2005-2009 period has not been adopted, so no key measures have been selected nor targets updated for this program.

Base Level for the Administration and Regulatory Support Program is $17,391,706 for FY06 and $17,469,290 for FY07. Base Level includes graduated salary increases of 3% to 1.5% each year over FY05 salary levels, along with related Personal Services Matching costs for 52 positions. This includes a $600 minimum increase for employees earning $20,000 or below. Included in Personal Services Matching is a $40 increase in the monthly contribution for State employee’s health insurance for a total State match of $320 per month.

The Agency is requesting 4 new positions as follows: An Insurance Department Education Outreach Director to manage dissemination of information to the general public, an Insurance Investigator II to assist the legal staff in fraud cases, and an Administrative Assistant I and an Applications & Systems Manager to bolster the Agency's Information Systems Program. Also requested are CLIP reclassifications for 6 positions, reclassification of 25 positions, upgrading of one position, one title change, and an extraordinary salary increase for the Insurance Assistant Deputy Commissioner for Finance to match the level of the requested new Director of Risk Management position. Costs for these personnel changes are $253,628 for FY06 and $260,691 for FY07.

Increases of $113,000 each year are requested in Operating Expenses for rent, utilities, and janitorial services in new quarters to house the Risk Management Program that has been expanded by the addition of 2 programs and 6 positions transferred to the Insurance Department from the Department of Education during FY04 by Act 78 of 2003, 2nd Extraordinary Session.

The Executive Recommendation provides for Base Level, as well as a reduction in Base Level of $78,636 each year in Travel-Conference Fees. In addition, the Executive recommends upgrading of one position and reclassification of 4 other positions.


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Funding Sources:

Appropriation / Program: 0425P01 Administration and Regulatory Support Services Program


Appropriation / Program Summary

Program GoalsProgram Description

This program is composed of all activities and resources necessary to administer and support the regulatory activities of the other Programs.

Effectively administer and support the regulatory activities of the other Programs.

1

Objective Name DescriptionCode

00FC Objective 1 Administration and Regulatory Support. Provide Department resources (management, personnel, systems, and material) necessary to continue to improve consumer protection by insurance industry regulation in Arkansas.

Objective Exec

Key Measures

Leg Type Description

Performance Measures

2004 Target Authorized /

Actual

2006 Target 2007 Target

1 Outcome 76%/93% 78% 80%% of agency key performance measures met.

1 Efficiency 30%/29% 30% 30%% of agency staff in Administration and support services as compared to total agency positions.

1 Efficiency 47%/35% 47% 47%% of agency budget in Administration and support services as compared to total agency budget.

1 Outcome 0/0 0% 0%Number of prior year audit findings repeated in subsequent audit.

1 Effort 10/6 10 10Number of proprietary information systems maintained by agency staff or maintained through contractual services.

1 Outcome 100%/100% 100% 100%% Gramm-Leach-Bliley (GLB) Financial Services Modernization Act- required changes in state regulation of insurance substantially complied with.

1 Outcome 100%/100% 100% 100%Implement all Commissioner approved National Association of Insurance Commissioners technology initiatives.

1 Effort 4.70%/2.00% 4.7% 4.7%Agency information technology budget as a percent of total agency budget

1 Outcome 63 days 63 daysNumber of days to enter all year-end closing entries into AASIS required for CAFR Report.


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Funding Sources:

Appropriation / Program: 0425P01 Administration and Regulatory Support Services Program



Objective Exec

Key Measures




Actual


1 Outcome 4 4Number of security and privacy policies promulgated by the State Executive Chief Information Officer implemented in required timeframe.


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Authorized Program Amount 17,357,755

Appropriation / Program: 0425P01


Admin/Reg Support Srvs

Historical Data Agency Request and Executive Recommendation

2003-2004Actual Base LevelBudgetCommitment Item Base Level Agency

2005-20062004-2005 2006-2007Agency Executive Executive

Regular Salaries 5010000 2,000,582 2,265,746 2,333,867 2,533,253 2,399,022 2,604,321 2,341,616 2,407,005

50 52 52 52 #Positions 56 56 52 52

Extra Help 5010001 105,218 140,000 140,000 140,000 140,000 140,000 140,000 140,000

19 19 19 19 #Extra Help 19 19 19 19

Personal Services Matching 5010003 510,085 627,319 664,505 718,747 676,934 732,326 666,017 678,492

Overtime 5010006 83 35,000 35,000 35,000 35,000 35,000 35,000 35,000

Operating Expenses 5020002 1,564,955 2,187,827 2,187,827 2,300,827 2,187,827 2,300,827 2,187,827 2,187,827

Travel-Conference Fees 5050009 111,367 193,636 193,636 193,636 193,636 193,636 115,000 115,000

Professional Fees and Services 5060010 150,204 471,871 471,871 471,871 471,871 471,871 471,871 471,871

Data Processing 5090012 81,332 215,000 215,000 215,000 215,000 215,000 215,000 215,000

Refund/Reimbursements 5110014 8,458,606 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000

Capital Outlay 5120011 157,577 100,000 100,000 100,000 100,000 100,000 100,000 100,000

Special Maintenance 5120032 5,589 50,000 50,000 50,000 50,000 50,000 50,000 50,000

Total 17,286,399 17,391,706 17,469,290 17,842,981 17,758,334 17,322,331 17,400,195 13,145,598

Funding Sources

Fund Balance 4000005 13,874,614 15,397,886 15,523,578 15,523,578 14,957,971 14,591,343 15,523,578 15,027,329

Special Revenue 4000030 6,183,209 6,323,869 5,737,877 5,737,877 5,650,984 5,650,984 5,737,877 5,650,984

Cash Fund 4000045 27,055 88,222 88,222 88,222 88,222 88,222 88,222 88,222

Miscellaneous Revolving 4000350 8,458,606 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000

Total Funding

Grand Total

Excess Appro/(Funding) (15,397,886)

28,543,484 32,349,677 31,697,177 31,330,549 32,349,677 32,809,977

13,145,598 17,469,290 17,758,334 17,391,706 17,286,399

(15,523,578) (14,957,971)

17,842,981

(14,591,343) (14,227,887) (13,487,568)

17,322,331

(15,027,346)

32,349,677

17,400,195

(14,366,340)

31,766,535


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Objective Summary

Objective:

Description:

00FC

Administration and Regulatory Support. Provide Department resources (management, personnel, systems, and material) necessary to continue to improve consumer protection by insurance industry regulation in Arkansas.

Admin/Reg Support Srvs-Objective 1-Treasury


Commitment Item

2003-2004

Actual Base LevelBudget Base Level Agency

2004-2005 2006-2007

Agency Executive Executive

2005-2006


#Positions 50 52 52 56 52 52 56 52

Extra Help 5010001 140,000 140,000 140,000 140,000 140,000 140,000 140,000 105,218

#Extra Help 19 19 19 19 19 19 19 19


Overtime 5010006 35,000 35,000 35,000 35,000 35,000 35,000 35,000 83

Operating Expenses 5020002 2,187,827 2,187,827 2,300,827 2,187,827 2,300,827 2,187,827 2,187,827 1,564,955


Professional Fees and Services 5060010 471,871 471,871 471,871 471,871 471,871 471,871 471,871 150,204

Data Processing 5090012 215,000 215,000 215,000 215,000 215,000 215,000 215,000 81,332

Refund/Reimbursements 5110014 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 11,000,000 8,458,606

Capital Outlay 5120011 100,000 100,000 100,000 100,000 100,000 100,000 100,000 157,577

Special Maintenance 5120032 50,000 50,000 50,000 50,000 50,000 50,000 50,000 5,589

Objective Total 13,145,598 17,286,399 17,391,706 17,758,334 17,322,331 17,469,290 17,842,981 17,400,195


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Funding Sources:

0425P02 - Regulation/Consumer Protection

TSI-Trust, FID-Federal, TFB-Trust, TIE-Trust, TIP-Trust

The Insurance Regulation and Consumer Protection Program conducts consumer protection activities that include financial examinations, industry licensure, rate reviews, and continuing education. It also conducts a risk management program to minimize government insurance costs and losses and regulates the prepaid funeral contracts industry. Funding for this program is by Federal Funds for consumer protection programs for senior citizens, by Trust Funds in the Fidelity Bond Trust Fund, and by special revenues contained in other Trust Fund accounts.

The Agency’s Fiscal Year 2004 Progress Report listed seventeen measures, of which the targets for all were met or exceeded. At this time, the Strategic Plan for the 2005-2009 period has not been adopted, so no key measures have been selected nor targets updated for this program.

Base Level for the Insurance Regulation and Consumer Protection Program is $7,367,357 for FY06 and $6,474,574 for FY07. Base Level includes graduated salary increases of 3% to 1.5% each year over FY05 salary levels, along with related Personal Services Matching costs for 82 positions. This includes a $600 minimum increase for employees earning $20,000 or below. Included in Personal Services Matching is a $40 increase in the monthly contribution for State employee’s health insurance for a total State match of $320 per month.

The Agency is requesting 3 additional positions of Certified Financial Examiner and a Director of Risk Management to manage an expanded Risk Management Program. Also requested are CLIP reclassifications for 17 positions, reclassification of 18 positions, and upgrading of 11 other positions. Costs for these personnel changes are $451,824 for FY06 and $463,984 for FY07.

Capital Outlay of $8,000 each year is requested for replacement of information technology equipment and $2,900 each year is requested in Operating Expenses for software upgrades and purchase of postal software for mass mailings to senior citizens.

The Executive Recommendation provides for Base Level, as well as a reduction in Base Level of $5,000 each year in Travel-Conference Fees. In addition, the Executive recommends 16 of the requested position reclassifications.


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Funding Sources:

Appropriation / Program: 0425P02 Insurance Regulation & Consumer Protection Program




This program is composed of all regulatory operations necessary to administer and provide current protection and future assurance to Arkansas insurance consumers; to safe-guard the consumer’s right to local, state-based insurance regulation by protecting it from federal encroachment; and to fulfill any additional responsibilities that may be vested in the Insurance Commissioner from time to time by the Legislature or Administration.

Preserve State Regulation of Insurance through cooperation with the other States, and by conducting regulatory operations in such a manner as to provide the best insurance regulatory services possible.

1


01FC Objective 1 Protect insurance consumers.

02FC Objective 2 Inform and assist insurance consumers.

03FC Objective 3 Minimize State government insurance costs and losses.

Objective Exec

Key Measures




Actual


1 Outcome 97%/99.46% 97% 97%Percentage of resident agents meeting continuing education requirements

1 Output 43,200/ 47,036

43,500 43,600Number resident and non-resident agents with active licenses

1 Outcome 75%/89.50% 85% 90%% of company applications for admission which were processed for initial response within 120 days.

1 Outcome 100%/100% 100% 100%% of domestic insurance companies required to be examined by Arkansas Statute, performed

1 Output 20%/26.40% 27% 19%Examinations performed as a % of domestic insurance companies licensed in Arkansas.

1 Outcome 100%/100% 100% 100%% of domestic insurance companies on which financial analysis reviews were performed

1 Efficiency 9.5/9.41 8 days 7 daysAverage processing time for agent licenses (in days)

1 Outcome 100%/100% 100% 100%Maintain full accreditation by annually achieving ever improving financial regulation standards.


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Funding Sources:

Appropriation / Program: 0425P02 Insurance Regulation & Consumer Protection Program



Objective Exec

Key Measures




Actual


2 Outcome $1,980,000/ $3,727,216

$1.95M $1.94MNumber of consumer monetary awards resulting from investigation of complaints

2 Output 4,400/2,936 4,800 5,000Number of consumer complaints filed

2 Outcome 91%/99% 93% 94%% of consumer complaints closed

2 Output 28,500/ 40,006

30,000 29,000Number consumer calls received/handled

2 Output 96%/96% 98% 99%% of Governor's Dislocated Worker Workshops participated in

3 Output 1,600/3,734 1,650 1,650Number of updates to Insurance Risk Assessment System (IRAS) property databases.

3 Output 1,400/2,467 1,550 1,600Number of Fidelity Bond Trust Fund contacts made.

3 Output 1,500/1,665 1,600 1,650Number of on site inspections and analysis of State owned facilities in order to develop enhanced real property appraisals.

3 Outcome 50%/55% 50 50% of insured State structures inspected to promote increased safety awareness and operating conditions, and to facilitate loss control and loss prevention.


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Regulation/Consumer Protection





81 82 82 82 #Positions 86 86 82 82

Personal Services Matching 5010003 754,489 857,705 915,855 1,002,440 933,317 1,021,884 924,095 941,786

Overtime 5010006 979 0 0 0 0 0 0 0

Operating Expenses 5020002 65,807 221,862 221,862 224,762 221,862 224,762 221,862 221,862


Professional Fees and Services 5060010 286 219,218 219,218 219,218 219,218 219,218 219,218 219,218

Data Processing 5090012 0 3,600 3,600 3,600 3,600 3,600 3,600 3,600

Refund/Reimbursements 5110014 0 150,000 150,000 150,000 150,000 150,000 150,000 150,000

Claims 5110015 756,802 1,000,000 2,000,000 2,000,000 1,000,000 1,000,000 2,000,000 1,000,000

Capital Outlay 5120011 0 0 0 8,000 0 8,000 0 0

Investments 5120013 0 760,637 760,637 760,637 760,637 760,637 760,637 760,637

Total 6,207,039 7,367,357 6,474,574 6,949,458 7,830,081 7,412,840 6,521,456 4,370,250

Funding Sources

Fund Balance 4000005 4,195,503 4,224,040 4,251,809 4,251,809 4,719,841 4,268,017 4,251,809 4,673,342

Federal Revenue 4000020 163,405 293,822 308,411 319,311 312,895 323,795 307,411 311,895

Special Revenue 4000030 3,577,684 3,836,131 5,422,123 5,422,123 4,509,016 4,509,016 5,422,123 4,509,016

Trust Fund 4000050 657,698 2,104,855 2,104,855 2,104,855 2,104,855 2,104,855 2,104,855 2,104,855

Total Funding

Grand Total


8,594,290 12,098,098 11,646,607 11,205,683 12,087,198 10,458,848

4,370,250 6,474,574 7,830,081 7,367,357 6,207,039

(4,251,809) (4,719,841)

6,949,458

(4,268,017) (5,172,033) (4,256,225)

7,412,840

(4,673,358)

12,086,198

6,521,456

(5,077,652)

11,599,108

FY05 Budgeted total exceeds Authorized amount in accordance with performance based budgeting transfer authority provided in Section 8 of Act 1463 of 2003.Claims commitment item for Prepaid Funeral Contracts Recovery is authorized with appropriation of $1,000,000 in the first year only and is included in Base Level for Claims in 2005-06 only. Special language provides that the unexpended balance remaining in the first year shall be carried forward and made available in the second year.


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Objective Summary

Objective:

Description:

01FC

Protect insurance consumers.

Regulation/Consumer Protection-Objective 1-Treasury


Commitment Item

2003-2004


2004-2005 2006-2007


2005-2006


#Positions 56 57 57 60 57 57 60 57


Overtime 5010006 0 0 0 0 0 0 0 938


Travel-Conference Fees 5050009 4,000 4,000 4,000 4,000 4,000 0 0 2,367

Professional Fees and Services 5060010 27,000 27,000 27,000 27,000 27,000 27,000 27,000 286

Data Processing 5090012 2,000 2,000 2,000 2,000 2,000 2,000 2,000 0

Claims 5110015 0 1,000,000 1,000,000 0 0 1,000,000 0 99,410

Objective Total 2,672,909 2,929,894 4,049,362 4,365,867 4,092,540 3,128,027 3,453,056 3,172,505


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Objective Summary

Objective:

Description:

02FC

Inform and assist insurance consumers.



Commitment Item

2003-2004


2004-2005 2006-2007


2005-2006

Regular Salaries 5010000 491,047 507,035 532,404 522,393 548,523 509,800 525,241 430,669

#Positions 19 19 19 19 19 19 19 19


Overtime 5010006 0 0 0 0 0 0 0 41




Data Processing 5090012 1,600 1,600 1,600 1,600 1,600 1,600 1,600 0

Capital Outlay 5120011 0 0 8,000 0 8,000 0 0 0

Objective Total 613,860 810,790 838,939 880,156 841,244 857,291 899,416 859,695


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Objective Summary

Objective:

Description:

03FC

Minimize State government insurance costs and losses.



Commitment Item

2003-2004


2004-2005 2006-2007


2005-2006


#Positions 6 6 6 7 6 6 7 6


Operating Expenses 5020002 5,000 5,000 5,000 5,000 5,000 5,000 5,000 306


Refund/Reimbursements 5110014 150,000 150,000 150,000 150,000 150,000 150,000 150,000 0

Claims 5110015 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 657,392

Investments 5120013 760,637 760,637 760,637 760,637 760,637 760,637 760,637 0

Objective Total 1,083,481 2,466,355 2,479,056 2,584,058 2,479,056 2,489,256 2,596,986 2,489,256


2



Funding Sources:

0425P03 - Insurance Fraud Program

TSI-Trust, TIF-Trust

The Insurance Fraud Investigation Program endeavors to fully and equitably enforce insurance criminal fraud provisions by investigating and pursuing prosecution of violations of the Arkansas Insurance Code and the Worker’s Compensation Law. Funding for this program is by special revenues in the State Insurance Department Trust Fund and the Insurance Fraud Invesigation Division Trust Fund.

The Agency’s Fiscal Year 2004 Progress Report identified four measures, of which the targets for two were met or exceeded. The measure for prosecuting attorney acceptance of 80% of referred cases resulted in 55% of referred cases being filed in court during FY04. The target was 95%. Of 33 cases referred, 18 were filed and 15 awaited a filing decision as the reporting period for FY04 ended. The measure for a 90% conviction rate on arraigned cases had a 90% result, compared to a target of 95%. At this time, the Strategic Plan for the 2005-2009 period has not been adopted, so no key measures have been selected nor targets updated for this program.

Base Level for the Insurance Fraud Investigation Program is $1,190,710 for FY06 and $1,214,752 for FY07. Base Level includes graduated salary increases of 3% to 1.5% each year over FY05 salary levels, along with related Personal Services Matching costs for 16 positions. This includes a $600 minimum increase for employees earning $20,000 or below. Included in Personal Services Matching is a $40 increase in the monthly contribution for State employee’s health insurance for a total State match of $320 per month.

The Agency is requesting one additional position of Attorney Specialist to do legal preparation on cases submitted for criminal activities and possible prosecution. Also requested are CLIP reclassifications for 5 Criminal Fraud Investigator positions, reclassification of a Management Project Analyst II position to Senior Fraud Investigator, and an extraordinary salary increase for the Fraud Division Director position to match the level of the requested new Director of Risk Management position. Costs for these personnel changes are $76,589 for FY06 and $78,771 for FY07.

$22,000 each year is requested in Travel-Conference Fees for additional training for criminal investigators. Capital Outlay of $13,500 is requested in the first year to replace a network printer and individual computers, along with increases in Operating Expenses of $7,230 in FY06 for data processing supplies and $6,230 in FY07 to subscribe to on-line access services with other criminal investigation agencies for assistance in criminal fraud cases.

The Executive Recommendation provides for Base Level, as well as reductions in Base Level of $8,000 each year in Travel-Conference Fees and $22,000 each year in Professional Fees and Services. In addition, the Executive recommends one position reclassification.


Page 173

Funding Sources:

Appropriation / Program: 0425P03 Insurance Fraud Investigation

TSI-Trust, TIF-Trust



Fraud Investigation Program. This program is composed of operations necessary to enforce the criminal fraud provisions of the Arkansas Insurance Code and the Workers' Compensation Law.

To fully and equitably enforce the criminal fraud provisions of the Arkansas Insurance Code and the Workers' Compensation Law.

1


04FC Objective 1 Investigate and prosecute fraudulent insurance code and Workers' Compensation Act violations.

Objective Exec

Key Measures




Actual


1 Efficiency 85%/95% 95% 100%Review and assign referrals to an investigator within 48 hours of receipt.

1 Outcome 100%/100% 100% 100%Investigation completed and closed or prosecution referred to local prosecutor prior to the expiration of the statute of limitation

1 Outcome 95%/55% 80% 80%Referred cases accepted by prosecuting attorneys.

1 Outcome 95%/90% 90% 90%90% conviction rate on arraigned cases.


Page 174




Insurance Fraud Program





16 16 16 16 #Positions 17 17 16 16




Professional Fees and Services 5060010 529 22,000 22,000 22,000 22,000 22,000 0 0

Data Processing 5090012 0 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Capital Outlay 5120011 4,996 6,070 6,070 19,570 6,070 6,070 6,070 6,070

Total 1,156,268 1,190,710 1,214,752 1,321,753 1,310,029 1,160,710 1,184,752 972,252

Funding Sources

Fund Balance 4000005 1,327,716 1,309,846 1,185,420 1,185,420 1,044,674 925,355 1,185,420 1,074,674

Special Revenue 4000030 954,382 1,031,842 1,049,964 1,049,964 1,055,445 1,055,445 1,049,964 1,055,445

Total Funding

Grand Total


2,282,098 2,235,384 2,100,119 1,980,800 2,235,384 2,341,688

972,252 1,214,752 1,310,029 1,190,710 1,156,268

(1,185,420) (1,044,674)

1,321,753

(925,355) (885,367) (659,047)

1,160,710

(1,074,674)

2,235,384

1,184,752

(945,367)

2,130,119


Page 175

Objective Summary

Objective:

Description:

04FC

Investigate and prosecute fraudulent insurance code and Workers' Compensation Act violations.

Insurance Fraud Program-Objective 1-Treasury


Commitment Item

2003-2004


2004-2005 2006-2007


2005-2006


#Positions 16 16 16 17 16 16 17 16




Professional Fees and Services 5060010 22,000 22,000 22,000 22,000 22,000 0 0 529

Data Processing 5090012 1,000 1,000 1,000 1,000 1,000 1,000 1,000 0

Capital Outlay 5120011 6,070 6,070 19,570 6,070 6,070 6,070 6,070 4,996

Objective Total 972,252 1,156,268 1,190,710 1,310,029 1,160,710 1,214,752 1,321,753 1,184,752


Page 176



Funding Sources:

0425P04 - Wkrs Comp/State Employees

HUA-Miscellaneous Agencies Fund, TUW-Worker's Compensation Revolving Fund, Other Funds

The Worker’s Compensation for State Employees Program provides claims management and worker’s compensation benefits for State, public school, city, and county employees with work related injuries or illnesses while striving to minimize injuries and claims costs. Funding for this program is by special revenues in the Miscellaneous Agencies Fund for personnel and operating expenses and from the Worker's Compensation Revolving Fund and the Miscellaneous Revolving Fund for claims.

The Agency’s Fiscal Year 2004 Progress Report identified four measures, of which the targets for all were met or exceeded. At this time, the Strategic Plan for the 2005-2009 period has not been adopted, so no key measures have been selected nor targets updated for this program.

Base Level for this program is $12,478,310 for FY06 and $12,508,126 for FY07. Base Level includes graduated salary increases of 3% to 1.5% each year over FY05 salary levels, along with related Personal Services Matching costs for 24 positions. This includes a $600 minimum increase for employees earning $20,000 or below. Included in Personal Services Matching is a $40 increase in the monthly contribution for State employee’s health insurance for a total State match of $320 per month.

The Department requests the addition of two new positions: A Health Care Analyst II and an Occupational Safety Coordinator to process initial worker’s compensation filings and to reduce claims incidence by devising safer working environments for employees of government agencies. Also requested are reclassification of an Agency Program Coordinator position to Program Support Manager and upgrading of the Public Employees Benefits Determination Assistant Director position from Grade 24 to Grade 25. Total salary and matching costs for these personnel changes are $75,630 for FY06 and $77,669 for FY07.

In Operating Expenses, an addition of $99,671 is requested in the first year for purchase of claims management software and $5,971 is requested in the second year for software upgrades.

The Executive Recommendation provides for Base Level, as well as a reduction of $8,000 each year in the Base Level for Travel-Conference Fees and Actual Expenditures of $159,431, plus the requested $99,671 in the first year for Operating Expenses.


Page 177

Funding Sources:

Appropriation / Program: 0425P04 Worker’s Compensation for State Employees

HUA-Miscellaneous Agencies Fund, TUW-Worker's Compensation Revolving Fund, Other Funds



The Worker’s Compensation Claim Management Program for state employees is responsible for providing worker’s compensation benefits for state employees with work related injuries or illnesses and residual claims of other public employees.

Efficiently administer the public employee Worker’s Compensation Program and minimize state employee injuries and claim costs.

1


05FC To efficiently process claims and make an eligibility decision on 75% on new lost time claims within 15 days of receipt of the claim in Public Employee Claims Division.

Objective Exec

Key Measures




Actual


1 Outcome 72%/79.47% 74% 75%Percent of new claims with eligibility decisions within 15 days.

1 Outcome $0.47/$0.44 0.45 0.44State government worker's compensation benefit cost rate per $100 of payroll

1 Efficiency 12%/11.31% 12% 12%Administrative costs as percent of claim expenditures.

1 Outcome 0.08%/0.05% .0700% .0675%Administrative costs per dollar amount of payroll.


Page 178




Wkrs Comp/State Employees





23 24 24 24 #Positions 26 26 24 24




Professional Fees and Services 5060010 0 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Data Processing 5090012 0 4,000 4,000 4,000 4,000 4,000 4,000 4,000

Claims 5110015 9,843,333 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000

Capital Outlay 5120011 14,302 10,000 10,000 10,000 10,000 10,000 10,000 10,000

Total 12,446,470 12,478,310 12,508,126 12,591,766 12,653,611 12,495,174 12,500,126 10,955,022

Funding Sources

Special Revenue 4000030 1,111,690 1,321,470 1,353,310 1,528,611 1,383,126 1,466,766 1,370,174 1,375,126

Miscellaneous Revolving 4000350 787,322 975,000 975,000 975,000 975,000 975,000 975,000 975,000

Workers' Comp Revolving 4000735 9,056,010 10,150,000 10,150,000 10,150,000 10,150,000 10,150,000 10,150,000 10,150,000

Total Funding

Grand Total

Excess Appro/(Funding) 0

10,955,022 12,653,611 12,508,126 12,591,766 12,478,310 12,446,470

10,955,022 12,508,126 12,653,611 12,478,310 12,446,470

0 0

12,591,766

0 0 0

12,495,174

0

12,495,174

12,500,126

0

12,500,126


Page 179

Objective Summary

Objective:

Description:

05FC

To efficiently process claims and make an eligibility decision on 75% on new lost time claims within 15 days of receipt of the claim in Public Employee Claims Division.

Wkrs Comp/State Employees-Objective 1-Treasury


Commitment Item

2003-2004


2004-2005 2006-2007


2005-2006


#Positions 23 24 24 26 24 24 26 24





Data Processing 5090012 4,000 4,000 4,000 4,000 4,000 4,000 4,000 0

Claims 5110015 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000 11,125,000 9,843,333

Capital Outlay 5120011 10,000 10,000 10,000 10,000 10,000 10,000 10,000 14,302

Objective Total 10,955,022 12,446,470 12,478,310 12,653,611 12,495,174 12,508,126 12,591,766 12,500,126


Page 180



Funding Sources:

1QA - AMAIT

TMI-Arkansas Multi-Agency Insurance Trust Fund

The Arkansas Multi-Agency Insurance Trust Fund Program was established by Act 1762 of 2003 to reduce the costs of insurance coverage for State agencies by combining their premium dollars in purchasing broader coverage for property and vehicle insurance with higher deductibles. The program is also designed to build a growing reserve to self-insure ever larger deductible amounts allowing further reductions in policy prices.

The Department requests Base Level for this program.

The Executive Recommendation provides for the Agency Request.


Page 181


1QATMI-Arkansas Multi-Agency Insurance Trust FundFunding Sources:

Appropriation / Program: AMAIT


2003-2004

Actual Base LevelBudgetCommitment Item Authorized Base Level Agency

2004-2005 2004-2005 2006-2007


2005-2006

AMAIT 5900046 3,711,097 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

Total 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 3,711,097

Funding Sources

Fund Balance 4000005 0 2,663,934 2,663,934 2,663,934 2,663,934 2,663,934 2,663,934 2,663,934

Trust Fund 4000050 6,375,031 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

Total Funding

Grand Total


6,375,031 12,663,934 12,663,934 12,663,934 12,663,934 12,663,934

3,711,097 10,000,000 10,000,000 10,000,000 10,000,000

(2,663,934) (2,663,934)

10,000,000

(2,663,934) (2,663,934) (2,663,934)

10,000,000

(2,663,934)

12,663,934

10,000,000

(2,663,934)

12,663,934

The Arkansas Multi-Agency Insurance Trust Fund (AMAIT) was established by Act 1762 of 2003. No fund balance existed on July 1, 2003.



Page 182



Funding Sources:

2HJ - Sch Motor Vehicle Insurance

TVI-Public School Vehicle Insurance Reserve Trust Fund

The Public School Motor Vehicle Insurance Program was transferred to the State Insurance Department from the Department of Education by Act 78 of 2003, 2nd Extraordinary Session, in February of 2004. This program provides voluntary insurance coverage to insure school district buses and other vehicles owned by the public schools.





Page 183


2HJTVI-Public School Vehicle Insurance Reserve Trust FundFunding Sources:

Appropriation / Program: Sch Motor Vehicle Insurance


2003-2004


2004-2005 2004-2005 2006-2007


2005-2006

Regular Salaries 5010000 15,523 75,122 0 77,375 77,375 79,695 79,695 77,375 79,695

0 2 2 2 #Positions 2 2 2 2 2

Personal Services Matching 5010003 4,443 21,394 0 22,768 22,768 23,221 23,221 22,768 23,221

Operating Expenses 5020002 1,467 32,000 0 32,000 32,000 32,000 32,000 32,000 32,000

Travel-Conference Fees 5050009 0 1,000 0 1,000 1,000 1,000 1,000 1,000 1,000

Professional Fees and Services 5060010 0 0 0 0 0 0 0 0 0

Data Processing 5090012 0 0 0 0 0 0 0 0 0

Claims 5110015 477,100 5,000,000 0 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000

Capital Outlay 5120011 0 0 0 0 0 0 0 0 0

Total 5,129,516 0 5,133,143 5,135,916 5,135,916 5,133,143 5,133,143 5,135,916 498,533

Funding Sources

Fund Balance 4000005 0 2,878,494 2,878,494 2,878,494 2,878,494 2,878,494 2,878,494 2,878,494

Trust Fund 4000050 3,377,027 5,129,516 5,133,143 5,133,143 5,135,916 5,135,916 5,133,143 5,135,916

Total Funding

Grand Total


3,377,027 8,011,637 8,014,410 8,014,410 8,011,637 8,008,010

498,533 5,135,916 5,133,143 5,133,143 5,129,516

(2,878,494) (2,878,494)

5,135,916

(2,878,494) (2,878,494) (2,878,494)

5,133,143

(2,878,494)

8,011,637

5,135,916

(2,878,494)

8,014,410

The Public School Motor Vehicle Insurance Program was transferred from the Department of Education to the State Insurance Department by Act 78 of 2003, 2nd Extraordinary Session. Authorized amounts are listed in Act 1608 of 2003, the appropriation act for the Department of Education.



Page 184



Funding Sources:

2HK - PE/Sec School Insurance

TBA-Public Elementary/Secondary School Insurance Fund

The Public Elementary/Secondary School Property Insurance Program was transferred to the State Insurance Department from the Department of Education by Act 78 of 2003, 2nd Extraordinary Session, in February of 2004. This program is designed to provide building and contents insurance to local school districts on a voluntary basis. Funding comes from charges to school districts that volunteer for insurance coverage.





Page 185


2HKTBA-Public Elementary/Secondary School Insurance FundFunding Sources:

Appropriation / Program: PE/Sec School Insurance


2003-2004


2004-2005 2004-2005 2006-2007


2005-2006

Regular Salaries 5010000 33,613 105,870 0 109,110 109,110 112,429 112,429 109,110 112,429

2 4 4 4 #Positions 4 4 4 4 4

Personal Services Matching 5010003 8,976 34,118 0 36,636 36,636 37,284 37,284 36,636 37,284

Operating Expenses 5020002 4,989 44,000 0 44,000 44,000 44,000 44,000 44,000 44,000

Travel-Conference Fees 5050009 0 500 0 500 500 500 500 500 500

Professional Fees and Services 5060010 0 0 0 0 0 0 0 0 0

Data Processing 5090012 0 0 0 0 0 0 0 0 0

Claims 5110015 2,018,456 9,000,000 0 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000

Capital Outlay 5120011 0 0 0 0 0 0 0 0 0

Total 9,184,488 0 9,190,246 9,194,213 9,194,213 9,190,246 9,190,246 9,194,213 2,066,034

Funding Sources

Fund Balance 4000005 0 5,580,079 5,580,079 5,580,079 5,580,079 5,580,079 5,580,079 5,580,079

Trust Fund 4000050 7,646,113 9,184,488 9,190,246 9,190,246 9,194,213 9,194,213 9,190,246 9,194,213

Total Funding

Grand Total


7,646,113 14,770,325 14,774,292 14,774,292 14,770,325 14,764,567

2,066,034 9,194,213 9,190,246 9,190,246 9,184,488

(5,580,079) (5,580,079)

9,194,213

(5,580,079) (5,580,079) (5,580,079)

9,190,246

(5,580,079)

14,770,325

9,194,213

(5,580,079)

14,774,292

The Public Elementary/Secondary School Property Insurance Program was transferred from the Department of Education to the State Insurance Department by Act 78 of 2003, 2nd Extraordinary Session. Authorized amounts are listed in Act 1608 of 2003, the appropriation act for the Department of Education.



Page 186


1NZTSI-TrustFunding Sources:

Appropriation / Program: Health Ins Pool


2003-2004


2004-2005 2004-2005 2006-2007


2005-2006

Grants and Aid 5100004 7,164,812 8,000,000 8,000,000 0 0 0 0 0 0

Total 8,000,000 8,000,000 0 0 0 0 0 0 7,164,812

Funding Sources

Fund Balance 4000005 7,164,812 8,000,000 0 0 0 0 0 0

Total Funding

Grand Total

Excess Appropriation/(Funding) 0

7,164,812 0 0 0 0 8,000,000

7,164,812 0 0 0 8,000,000

0 0

0

0 0 0

0

0

0

0

0

0

This Appropriation is not requested for the 2005-2007 Biennium.



Page 187


1PGTSI-TrustFunding Sources:

Appropriation / Program: Fire Departments


2003-2004


2004-2005 2004-2005 2006-2007


2005-2006

Grants and Aid 5100004 835,188 0 8,000,000 0 0 0 0 0 0

Total 0 8,000,000 0 0 0 0 0 0 835,188

Funding Sources

Fund Balance 4000005 835,188 0 0 0 0 0 0 0

Total Funding

Grand Total

Excess Appropriation/(Funding) 0

835,188 0 0 0 0 0

835,188 0 0 0 0

0 0

0

0 0 0

0

0

0

0

0

0

This Appropriation is not requested for the 2005-2007 Biennium.



Page 188

state insurance department

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